Tariff Policy - Trade independence

Economic survival lay at the heart of America's earliest diplomatic
initiatives, and thus the tariff, as an element of commercial policy,
played a major role in the efforts of the Founders to build the nation and
protect it from external aggressors. The country's founding
coincided with the era of mercantilism, in which trade was subject to
oftentimes irrational discrimination from abroad that threatened to choke
off America's lifeblood. The new nation depended on exports and
imports, so the Founders pushed for fair and equal access to markets
overseas out of economic desperation as well as the desire for political
independence. They were, in essence, trade liberalizers out of necessity
(although they also promulgated a vision of a world of open and equitable
commerce). Tariff policy was placed in the hands of Congress, not only to
ensure an equitable system of taxation but as a means of uniting the
disparate regions of the former thirteen colonies into a large and viable
free-trade area with power to promote American foreign policy aims. The
Constitution established a uniform, enforceable system of import duties
(along with shipping rules and foreign treaties) that regulated the
economies of the states into a national whole. This combination of a
common external tariff with free trade among the states prevented each
state from engaging in separate economic diplomacy with Europe. The
country spoke with one voice in negotiations. Access to this tariff-free
area was a card to be played in negotiations with the Europeans and, in
particular, Great Britain.

Tariff policy, therefore, helped to build the economic infrastructure of
the new nation while America engaged in great power diplomacy. The United
States designed its customs policy with protection in mind; thus tariffs
and protectionism became synonymous from the opening of the first Congress
in 1789. Officials imposed duties mainly for revenue purposes but also to
coax foreign nations to ease restrictions on U.S. shipping and trade.
Thomas Jefferson, James Madison, and other foes of Britain had earlier
proposed a schedule of additional duties on goods imported from those
nations, namely England, that had no commercial treaty with the United
States. Fearing retaliation, President George Washington sought a
diplomatic solution with Britain, which made concessions and thereby
confirmed to Jefferson that tariff policy could ensure America would not
be pushed around by the Europeans.

The Tariff of 1789 represented America's first tariff legislation,
designed by Alexander Hamilton primarily to raise revenue by setting up
the bureaucratic machinery for administering duties. But it also attempted
to undercut European commercial monopolies and expand over-seas markets by
insisting on equal treatment for nations that accorded U.S. goods the same
nondiscriminatory access. As matters stood, nations without commercial
treaties with the United States (Britain) stood on an equal footing with
treaty powers (France). Federalists sought to stave off Jeffersonian trade
retaliation policies that might jeopardize American security.

The effort at gaining reciprocal lowering of foreign restrictions in
return for decreased U.S. protectionism did not work well during the
succeeding wartime period in Europe; the United States found the threat of
higher tariffs useless in protecting its neutral shipping from seizure on
the seas. The nation was just too reliant on tariff revenue. To be sure,
as the War of 1812 loomed, the Jefferson administration cut off trade with
the British and French but, recognizing U.S. dependence on customs duties,
left commerce open with the rest of the world.